Jersey City biz groups criticize plan for payroll tax

A plan to implement a payroll tax in Jersey City has alarmed business owners and industry groups who say it would limit Jersey City's competitiveness and aggravate an already inhospitable tax environment.

The plan, which is moving swiftly through the state Legislature, would allow the city to impose a 1 percent tax on a business' payroll, with potential exceptions for the wages of city residents. Proposed as a way to fund Jersey City's public-school district, it was approved on a party-line vote by a state Senate committee on Monday.

Some of the state's major industry groups oppose the tax, as does the Hudson County Chamber of Commerce. Its president and CEO, Maria Nieves, said state lawmakers did not get input from Jersey City businesses before proposing the idea, which she thinks will have a greater impact than its supporters say.

"At some point this new tax is going to have to be absorbed in some way," Nieves said. "When the cost of doing business increases, that cost is usually absorbed at some point down the line by employees who may see less in terms of benefits or raises. And it goes back to consumers."

The New Jersey Business & Industry Association is also opposed.

"This tax proposal would place an additional burden on businesses of all sizes and increase their cost of doing business," Andrew Musick, an NJBIA vice president, said in a statement. "This additional tax would add to the already high property taxes, new labor mandates and energy mandates passed over the last few months."

A survey by U.S. News and World Report ranked New Jersey 47 on a list of states with low tax burdens. D.C.-based Tax Foundation ranked the state dead last in its list of states with the best business climates, citing its high property taxes and "some of the worst-structured individual income taxes in the country."

Newark is the only municipality in the state with a payroll tax. The bill under consideration by state lawmakers, S-2581, would allow Jersey City to implement one and would require the revenue be given to the 29,000-student school district. Its co-sponsors are State Sens. Sandra B. Cunningham and Brian Stack.

In a statement on Monday, Stack, D-Union City, said, "The tax increase would not have a big impact on employers, but it would have a big impact on our municipality, and the lives of those living and working in the area."

The debate over the tax comes amid a larger debate about school funding. State Sen. President Stephen Sweeney, who supports the tax, has proposed a separate bill that would lead to the elimination of a type of state aid that was expected to bring $175 million to Jersey City's school district next year (the aid would be slashed in increments over a five-year period). The payroll tax was proposed to offset those possible cuts in aid.

Nieves said she believes lawmakers have not truly studied the economic effects of the new tax and disputes Stack's notion that it would "not have a big impact" on businesses. Sweeney's office has said he expects it would bring in at least $70 million annually for Jersey City's schools. Newark's brings in $48 million, which goes to the city coffers.

Census figures show annual payroll for private industry in Hudson County is $15.4 billion. Nieves believes most of that is generated in Jersey City.

If the bill becomes law, Jersey City must ultimately approve the tax. Mayor Steve Fulop is publicly neutral, with city spokeswoman Hannah Peterson saying the administration wants to see the final bill before weighing in. Jersey City Board of Education President Sudhan Thomas supports the tax.

Nieves questioned the provision in the bill that would allow the city to tax only the wages of non-residents.

"Where are we trying to put the burden for the local school system?" she said. "Is it supposed to go to the residents who directly benefit from the local school system, or is it supposed to be shouldered by people who don't even benefit?"